Metropol Corporation Limited’s Post

Pressure Mounts on Kenya’s Treasury on Rising Rates Against Domestic Borrowing The National Treasury plans to raise its domestic borrowing target by 27% to Ksh.522.7 billion ($4.05bn) and slash external borrowing by over 50% to Ksh.166.7 billion ($1.29bn) for the 2025/26 financial year (FY), aiming to shift from short- to long-term debt securities. https://lnkd.in/dcNgd89M

Kenya’s National Treasury is taking significant steps to reduce the dominance of banks in the government securities market, aiming to broaden the pool of investors and lower the high interest rates that the country has faced. In its annual borrowing plan for the 2024/2025 fiscal year, the Treasury outlined reforms aimed at expanding access to government bonds for non-banking financial institutions, which could help stabilize the country’s debt costs. https://bit.ly/4dNYFFp

The Treasury is reducing its projected net domestic borrowing for the 2023/2024 fiscal year by Sh67.5 billion, revising the target down to Sh407 billion, to support the Central Bank of Kenya's (CBK) efforts to lower interest rates. Concurrently, external borrowing targets have been raised to Sh501.6 billion from Sh412.1 billion, signaling anticipated increased funding from international lenders like the IMF and World Bank. By decreasing domestic borrowing, the Treasury empowers the CBK to reject high-interest bids on local debt, aiming to curb domestic debt costs. However, interest rates on Treasury bills have remained stubbornly high, with analysts noting that the large volume of maturing domestic debt (Sh369 billion between May and June) could pose challenges to reducing rates. The government's net domestic borrowing stood at Sh387.1 billion in the first nine months of the fiscal year, leaving only Sh19.9 billion to be borrowed locally in the next two months. Despite these adjustments, a significant revenue shortfall of Sh270.7 billion persists due to tax revenue undercollection and lower appropriations-in-aid, casting doubts on meeting the revenue targets set in the Supplementary II Budget. Read more: https://lnkd.in/dGPhA5wm

How To Invest In Treasury Bonds & Bills In Kenya | Complete Guide https://lnkd.in/d_rEbKsx

The US$360m would bring the total disbursements for the three-year IMF financing support under the country’s Post COVID-19 Programme for Economic Growth (PC-PEG) to US$1.6 billion.

Kenya is again seeking additional funding from the International Monetary Fund (IMF), with negotiations in their final stages according to Central Bank Governor Kamau Thugge. This move comes as the East African nation grapples with a significant debt burden and recent political unrest that forced the government to abandon planned tax increases. The country hopes to merge the seventh and eighth assessments of its existing $3.6 billion support program, potentially securing new funds by year-end. However, this renewed engagement with the IMF is not without controversy. Critics, including Kenyans living abroad, have raised concerns about corruption and mismanagement of previous loans. They argue that further borrowing may be unsustainable and could lead to higher taxes and austerity measures down the line. Conversely, the government views IMF support as crucial for stabilizing the economy and implementing necessary reforms. As Kenya navigates these complex financial waters, the success of any new IMF program will hinge on the government's ability to implement promised reforms, maintain political stability, and address transparency concerns. The coming months will reveal whether this latest round of IMF engagement can serve as a catalyst for meaningful economic change or if it will merely postpone more fundamental fiscal challenges. Read More: https://lnkd.in/eeFDd4TH #KenyaEconomy #IMFNegotiations #DebtManagement #AfricanFinance #EconomicPolicy

Dr. Manzoor Ahmad, in his latest article, explores the critical impact of the IMF’s support on Pakistan’s economic reforms. As IMF Managing Director Kristalina Georgieva recently stated, "Growth is up, inflation is down, and the economy is on a sound path." This development comes with the approval of Pakistan's 25th loan from the IMF, signaling renewed confidence in the nation's economic policies. Dr. Manzoor's analysis provides a deeper understanding of how international financial institutions and local reforms are contributing to Pakistan's economic recovery.

In this investigative piece, 1. I say more about the Ghanaian government's decision to covertly introduce short-term treasury bills and go to great lengths to ensure that only a few financial industry folks know about them. 2. I also point out that the "inverted yield" situation, where these "covert" treasury bills are more profitable than the conventional t-bills, suggests attempts to game investor sentiment, hide the reality of the government's cashflow situation, and misrepresent true market conditions, especially regarding prevailing pricing and rates. 3. Finally, I highlight clear signs that the government, especially in the last month and half, has resorted to desperate "side-trading" to borrow far more than it has communicated in official fiscal plans. https://lnkd.in/dnt-gYiy

Balance of payments of a country is the difference between all money flowing into the country in a particular period of time and the outflow of money to the rest of the world. An IMF-supported program should be designed to resolve Sri Lanka’s acute balance of payments problems. https://aje.io/t4btwv

"The IMF has commended SA on its strengths, but cautioned that the country's underlying growth and fiscal problems require an acceleration of structural reforms and action that is firmer than contemplated in February's budget. The IMF's Africa department head, Abebe Aemro Selassie, told Business Day that SA needed to achieve a fiscal consolidation effort of up to 3% over the next three years to put the public debt on a declining path. But he said SA was privileged to have deep and liquid financial markets that enabled the government and corporates to fund themselves domestically, despite the decline in capital inflows to SA and other emerging markets over the past couple of years. SA also had one of the most flexible exchange rates among emerging markets, which helped insulate the economy from global shocks, he said. Selassie said SA's large increase in public debt had not delivered on addressing the infrastructure bottlenecks and other challenges the country faced, with growth remaining anaemic. "The trajectory for both growth and primary balance has to change... You want to move the primary balance at a minimum to a level that stabilises debt over the next three or four years and ideally brings it down. "That ambition is going to be up to what political appetite there is, but we estimate that the primary balance would reach close to 1% of GDP in the medium term, and you’re going to need an additional two to three percentage points to stabilise the debt and eventually bring it down," he said. The primary balance is the gap between government's revenue and its noninterest expenditure. The government has long run primary deficits, which kept ramping up the national debt. In February, finance minister Enoch Godongwana announced that in 2024 the government would achieve a primary surplus for the first time since 2008/09. The budget pencilled in primary surpluses for the next three years, rising to 1.8% of GDP, and projected that debt would stabilise in 2025/26. But several economists are sceptical that this can be achieved — even with the help of the partial drawdown announced by Godongwana on the gold & foreign exchange contingency reserve account (GFECRA), which houses the unrealised profits on SA's reserves. ... But, he said, "the GFECRA drawdown is not going to help you bridge the improvement in the primary balance that you need to stabilise the debt and eventually get it to come downwards ... continued recourse to this source of funding wouldn't be appropriate, including because there is uncertainty that the gains that have accumulated will persist. The government took a pragmatic decision to use some of the gains, but they need to think about fiscal measures on the revenue and spending efficiency side to help deliver on the fiscal improvement that's needed.""